On January 1, 2021, RM Company (lessee) entered into a 5-year lease for drilling equipment. RM accounted for the acquisition as a finance lease for ₱2,400,000, which includes a ₱100,000 purchase option that is reasonably certain to be exercised. RM estimates that the fair value of will be ₱200,000 at the end of its 8-year economic life. RM regularly uses the straight-line depreciation on similar equipment. For the year ended December 31, 2021, what amount should RM recognize as depreciation expense on the leased asset?
On January 1, 2021, RM Company (lessee) entered into a 5-year lease for drilling equipment. RM accounted for the acquisition as a finance lease for ₱2,400,000, which includes a ₱100,000 purchase option that is reasonably certain to be exercised. RM estimates that the fair value of will be ₱200,000 at the end of its 8-year economic life. RM regularly uses the straight-line depreciation on similar equipment. For the year ended December 31, 2021, what amount should RM recognize as depreciation expense on the leased asset?
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
Related questions
Question
On January 1, 2021, RM Company (lessee) entered into a 5-year lease for drilling equipment. RM accounted for the acquisition as a finance lease for ₱2,400,000, which includes a ₱100,000 purchase option that is reasonably certain to be exercised. RM estimates that the fair value of will be ₱200,000 at the end of its 8-year economic life. RM regularly uses the straight-line
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 2 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, accounting and related others by exploring similar questions and additional content below.Recommended textbooks for you
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Accounting
Accounting
ISBN:
9781337272094
Author:
WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:
Cengage Learning,
Accounting Information Systems
Accounting
ISBN:
9781337619202
Author:
Hall, James A.
Publisher:
Cengage Learning,
Horngren's Cost Accounting: A Managerial Emphasis…
Accounting
ISBN:
9780134475585
Author:
Srikant M. Datar, Madhav V. Rajan
Publisher:
PEARSON
Intermediate Accounting
Accounting
ISBN:
9781259722660
Author:
J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:
McGraw-Hill Education
Financial and Managerial Accounting
Accounting
ISBN:
9781259726705
Author:
John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:
McGraw-Hill Education